Take someone earning $70,000 a year with a $35,000 student loan balance. Repayments are 12 cents on every dollar earned above the annual threshold of about $24,128. The income above the threshold is $70,000 minus $24,128, which is $45,872. Multiplying that by 12 percent gives an annual repayment of $5,505, or about $106 a week, deducted automatically through PAYE.
Because the loan is interest-free while you live in New Zealand, every dollar of that $5,505 reduces the principal directly, with nothing lost to interest. To clear a $35,000 balance at $5,505 a year takes roughly 6.4 years at this income, assuming pay stays flat. A pay rise would lift the repayment and clear it faster, since the 12 percent applies to more income. Note that overseas-based borrowers are charged interest, so this interest-free assumption only holds while you remain a New Zealand resident.
Step
Value
Annual income
$70,000
Less repayment threshold
$24,128
Income above threshold
$45,872
Annual repayment at 12 percent
$5,505
Years to clear $35,000
6.4 years
How it is calculated
New Zealand student loan repayments are income-contingent. You repay 12 cents for every dollar you earn above the annual repayment threshold, which sits at roughly $24,128, and earnings below that threshold trigger no repayment at all. The deduction happens automatically through PAYE, alongside income tax and the ACC levy, so most borrowers never make a separate payment. Crucially, loans are interest-free for the time you live in New Zealand, which means each repayment reduces the outstanding principal one for one. The payoff time is simply the balance divided by the annual repayment, holding income flat. The picture differs for overseas-based borrowers, who face interest charges and fixed repayment obligations rather than the income-linked rule.
Frequently asked questions
How do NZ student loan repayments work?
You repay 12 cents for every dollar earned above the annual repayment threshold (about $24,128), deducted automatically through PAYE. Loans are interest-free while you live in New Zealand, so every repayment reduces the principal directly. Overseas-based borrowers are charged interest.
What happens to my student loan if I move overseas?
Once you have been overseas for 183 days or more in any 12-month period, IRD reclassifies you as an overseas-based borrower. Interest starts accruing at a rate set annually (currently around 3.6% for the 2025/2026 year). You also have a fixed minimum repayment obligation based on your loan balance rather than the income-contingent PAYE rule. If you return to New Zealand and re-establish residency, the interest stops and you revert to the resident repayment rules.
Can I make voluntary extra repayments to clear my loan faster?
Yes. You can make lump-sum or regular voluntary repayments directly to IRD at any time with no penalty. Because the loan carries no interest for residents, the effective "return" on an extra repayment is purely the avoided future deduction. IRD processes voluntary payments the same business day they are received when made through myIR or internet banking using your IRD number as the reference.
Does KiwiSaver affect my student loan repayments?
KiwiSaver contributions do not reduce the income figure IRD uses to calculate student loan repayments. Your employer deducts KiwiSaver (3%, 4%, 6%, 8%, or 10% of gross pay) and student loan repayments (12% above threshold) separately. Both are shown on your payslip as distinct deductions. The employer superannuation contribution tax (ESCT) paid by your employer on KiwiSaver contributions also has no effect on your student loan obligation.